QUAKE INSURANCE

Dominion, Volume 24, Issue 143, 13 March 1931, Page 11

QUAKE INSURANCE

National Fund Plan INCALCULABLE RISKS Commission Suggested “Earthquake Insurance at the best is a gamble, and- therefore Is outside the legitimate field of operation for insurance companies, and if the legitimate insurance companies operating in New Zealand were to underwrite the whole of the business offering they would be flirting with bankruptcy,” states a report which has been prepared by a professional man on a scheme for a national mutual earthquake insurance fund. The scheme has received favourable comment in commercial circles In Wellington. The author of the scheme points out that earthquake risks are Incalculable, and therefore uninsurable in the ordinary sense. He mentions the unavoidable fact that what has happened in Hawke’s Bay may occur at any time in other parts of New Zealand. It is stated that insurance underwriters would be’ glad to avail themselves of any scheme which would relieve thqm of the risks now being carried so long as it guaranteed them freedom of action and legitimate competition in other fields of insurance. The report supports tho opinion that in connection with the Hawke’s Bay disaster insurance companies should not be expected to depart from their settled policy in justice to policy-hold-ers and shareholders. . It is submitted that the financing of reconstruction in Hawke’s Bay should be dealt with as part of a comprehensive scheme which could apply, if necessary, to any part of New Zealand. Attention is drawn to the fact that without earthquake insurance on publicly-owned buildings and utilities, the potential liability falling on the Consolidated Fund and local-body rates is bound to have a depressing effect on Government and localbody securities, and adversely to affect borrowing powers. * Sounder Securities. On the other hand, a sound scheme of national earthquake insurance, independent of the Consolidated Fund and localbody finances, and beyond tbe payment of annual premium, would greatly strengthen the market for both public and private securities. In the raising of funds for reconstruction a body acting independently of the Government would not be restricted to the London market, the report points out. . In outlining his scheme for a national mutual earthquake insurance fund administered by a commission entirely free from political influence, the author assumes firstly that earthquake insurance would be compulsory on all public buildings, contents, and utilities, which could possibly be regarded as suitable subjects for earthquake insurance. All properties and utilities would be classified by engineering and geological experts and the premiums graded accordingly, the amount of insurance on privately-owned buildings being two-thirds of the assessed capital rateable value. ~ , Privately-owned utilities would be valued and insured on the same basis as privately-owned buildings. Public utilities and buildings would be valued by the commission’s experts and insured for the full amount less any sums accumulated in sinking fund or written off as depreciation. Insurance on contents of buildings would be two-thirds the value placed on them by the owners, and the rates charged wrtuld be graded according to the classification of the building and tho nature of the goods. Method of Finance. The proposal for financing the scheme is outlined as follows:—“The commission would be authorised to borrow when necessary up to a total amount fixed by statute/on the security of the insurance premiums. The insurance rates would be calculated so as to produce an annual sum sufficient to cover the interest and sinking fund on the full amount which the commission is authorised to borrow, plus administration expenses. The .commission would borrow firstly, sufficient to compensate the Government, local bodies, and private individuals who have sustained loss in the Hawke’s Bay disaster, just as if the fund had been in operation at that time. Insurance companies would be reimbursed for . the amounts already paid out on policies in force at the time of the. earthquake, and would be relieved of risks underwritten since. The companies would hand over to the fund the premiums received on these policies, less administration expenses.” The report adds that after satisfying interest and sinking fund charges . on borrowed moneys and meeting administration expenses, the balance of the income from premiums would go to establish a reserve fund. Rates could be progressively reduced as the fund grew. The scheme is carefully worked out to a conclusion as follows: —“Assuming that the a'V’unt the commission is authorised to borrow is £10.000,000, the insurance premiums required to meet interest at 6 per cent., sinking fund nt 1 per cent., anil administration charges of 1 per cent., would be S per cent., or £BOO.OOO. Assuming that the. total insurable value of public and private property in New Zealand is in the neighbourhood of £600,000.000, this annual sum of £BOO.OOO would be met by an average premium of .13 per cent, or 2/7 per cent.”

HOUSING OF REFUGEES

Accommodation in Hospital CENTRALISATION FEARED Dominion Special Service. Masterton, March 12. The Wairarapa Hospital Board’s action in transferring patients from tbe Grey town Hospital tp the Musterton Hospital, in order to accommodate at the Greytown institution, inmates of the Parke Island Old Men’s Home, which was destroyed by the earthquake, has been strongly criticised in Greytown. The Mayor (Mr. H. T. Rees) waited upon the local branch of the Farmers Union and told them that residents of the district feared that the thin edge of the wedge for centralisation was being inserted, and the people wanted a guarantee from the board that this was not so. After discussion the union carried a resolution strongly protesting against the hospital board’s action in removing patients without first consulting with the contributing bodies, as the union feared that this was a step toward centralisation. The Mayor also telegraphed the Minister of Health entering a strong protest against any interference with the hospital, and pointing out that it serves a large area in the South Wairarapa. The Minister, in his reply, appealed to Greytown citizens to co-operate with the hospital board in an emergency measure to relieve a small section of institutional refugees from the institution without prejudice to the Greytown Hospital. Tho Greytown Town Lauds Trust has also taken strong exception to the hospital board’s action, and has circularised all the local bodies of the South Wairarapa, inviting them to a meeting of protest against the hospital boards action. When the hospital board at its last meeting agreed to accommodate the inmates of the home, it was stressed that the arrangement was purely an emergency measure and a stipulation was made that it should not hold good for more than twelve month*.